Form 10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 33-92454
ZIEGLER MORTGAGE SECURITIES, INC. II
(Exact name of registrant as specified in its charter)
Wisconsin 39-1539696
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
215 North Main Street, West Bend, Wisconsin 53095
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (414) 334-5521
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES (X) NO ( )
Aggregate market value of voting stock held by non-affiliates of the
registrant: None
Number of shares outstanding of registrant's classes of common stock, as of
January 31, 1997:
Class Shares Outstanding
Common Stock, 20,000
$1.00 Par Value
DOCUMENTS INCORPORATED BY REFERENCE: NONE
<PAGE>
FORM 10-K
ZIEGLER MORTGAGE SECURITIES, INC. II
PART I
Item 1 - Business
Ziegler Mortgage Securities, Inc. II (the "Company") is a limited
purpose finance company which is owned equally by The Ziegler Companies,
Inc. and Mr. James G. Pouros. The Company was organized to facilitate the
financing of mortgage loans and does not intend to engage in any other
business activities at this time.
The Company issues bonds from time to time in series, each of which
will be secured by a separate security package consisting of GNMA
Certificates (the "GNMA Certificates") issued by the Government National
Mortgage Association ("GNMA") and/or Guaranteed Mortgage Pass-Through
Certificates (the "FNMA Certificates") issued by the Federal National
Mortgage Association ("FNMA") (collectively the "Mortgage Certificates").
The Company does not have, nor is it expected in the future to have, any
significant assets other than the assets pledged as security for specific
series of securities issued by it.
The full and timely payment of the principal of and interest on the
GNMA Certificates is guaranteed by GNMA. The GNMA guaranty is backed by
the full faith and credit of the United States. FNMA guarantees the
payment of principal and interest on the FNMA Certificates issued by it,
but the FNMA guaranty is not backed by the full faith and credit of the
United States.
B. C. Ziegler and Company, which acts as the underwriter for the
bonds, is a wholly-owned subsidiary of The Ziegler Companies, Inc., owner
of 50% of the outstanding common stock of the Company. B. C. Ziegler and
Company provides management and administrative services to the Company for
which, pursuant to a management agreement with the Company, it is entitled
to receive a semiannual management fee not to exceed .375% of the aggregate
outstanding principal amount of bonds on the last day of the month
preceding each semiannual payment date.
As of December 31, 1996, the Company has issued eighty-two series of
bonds totaling $340,177,000 and acquired one series of bonds totaling
approximately $1,961,000 in a 1994 merger, of which $101,047,000 still are
outstanding.
There are no paid employees of the Company.
Item 2 - Properties
The Company owns no real estate and leases no office space.
Item 3 - Legal Proceedings
The Company is not a party to any material pending legal proceedings.
Item 4 - Submission of Matters to a Vote of Security Holders
None
<PAGE>
PART II
Item 5 - Market for the Company's Common Stock and Related Security
Holder Matters
There is no market for the common stock of the Company. The Ziegler
Companies, Inc. and Mr. James G. Pouros each own 50% of the issued and
outstanding shares of the Company.
Item 6 - Selected Financial Data
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Total Revenues $ 10,383,391 $ 10,623,778 $ 11,144,634
Net Income $ - $ - $ -
Earnings Per Share
of Common Stock $ - $ - $ -
Cash Dividends Per
Share Declared $ - $ - $ -
Total Assets $105,526,490 $125,212,243 $122,392,125
Long-term Obligations $101,047,000 $119,908,000 $117,018,000
Stockholders' Equity
at Year End $ 1,520,000 $ 1,520,000 $ 1,520,000
</TABLE>
Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations - Comparison of Years 1996, 1995 and 1994
During 1996, the Company issued two series of Mortgage
Certificate-Backed Bonds totaling $6,224,000. During 1995, the Company
issued four series of Bonds totaling $10,925,000. During 1994, the Company
issued seven series of Bonds totaling $21,402,000. Unfavorable spreads
between the interest yields on the mortgage certificates and the
Certificate-Backed Bonds have kept the Company from issuing additional
series in 1996. Total revenues, consisting mostly of interest income, for
1996, 1995 and 1994 totaled $10,383,391, $10,623,778 and $11,144,634,
respectively.
As a result of lower interest rates, the Company experienced a higher
level of bond redemptions caused by the liquidation or sale of Mortgage
Certificates particularly in 1994 and again in 1996. Bond redemptions fell
dramatically in 1995 which saw interest rates increase and liquidation and
sale volumes decline. Total bonds redeemed in 1996, 1995 and 1994 were
$25,085,000, $8,035,000 and $52,154,000, respectively. These redemptions
were based on Mortgage Certificate sales and liquidations totaling
$25,062,000, $8,011,000 and $33,126,000 in 1996, 1995 and 1994,
respectively. These Mortgage Certificate sales and liquidations and
subsequent bond redemptions result in gains on sale of mortgage
certificates and offsetting increases in amortization of bond issue costs
in the Statements of Operations.
In accordance with a written management agreement, management fees of
the Company were limited to the amount which prevents the Company from
incurring a loss. It is anticipated that the Company will continue to
operate at close to a breakeven level in future years.
Liquidity and Capital Resources
The Company has no fixed assets nor any commitments outstanding to
purchase or lease any fixed assets.
Each series of bonds is structured in a manner such that funds
received from the related Mortgage Certificates are sufficient to fund all
interest and principal payments on the bonds, and all other expenses of the
Company. This can be seen in the Statements of Cash Flows. For 1996,
there was a net increase in cash and cash equivalents totaling
approximately $105,000. Net income was zero because of the management fee
paid to B. C. Ziegler and Company. The primary net cash receipt from
investing activities totaled $19,024,000 from an excess of amounts received
from Mortgage Certificate liquidations over the amounts invested in the
purchase of new Mortgage Certificates which serve as collateral for the two
Bond series issued during 1996. The primary net disbursement from
financing activities totaled $19,048,000 which arose from an excess of cash
disbursed to redeem outstanding Bonds from previous series over cash
received from the issuance of the two Bond series during 1996.
The Company has 15,000 shares of $9.00 non-cumulative, non-voting
preferred stock outstanding. No dividends were declared or paid in 1996,
1995 or 1994. The Company may redeem any or all of the preferred stock at
any time, at a redemption price of $100 per share. During 1994, the
Company redeemed 5,000 shares.
Effective December 30, 1994, AMSI, another limited purpose finance
company organized to facilitate the financing of mortgage loans, merged
with and into the Company. Prior to the merger, AMSI was owned 50% by The
Ziegler Companies, Inc. and 50% by Mr. James G. Pouros. The Company
assumed all the assets and liabilities of AMSI at year end 1994. These
assets and liabilities, primarily one outstanding bond issue totaling
$1,961,000 which was collateralized by a separate pool of Mortgage
Certificates totaling $1,966,000, at amortized cost, are included in the
Company's Balance Sheet as of December 31, 1996 and 1995. The merger
produced no effect on the Company's 1994 operations since it was not
effective until year end.
Item 8 - Financial Statements and Supplementary Data
The financial statements of the Company, together with the related
Notes to Financial Statements and Report of Independent Public Accountants,
are contained in the Financial Statements for the fiscal years ended
December 31, 1996, 1995 and 1994, included herein.
Item 9 - Disagreements with Accountants on Accounting and Financial
Disclosure
There were no reports on Form 8-K reporting a change of accountants
or a disagreement with accountants on any matter of accounting principles
or practices on financial statement disclosure filed during the fiscal year
1996.
<PAGE>
PART III
Item 10 - Directors and Executive Officers of the Company
Position
Held
Position Held Since
Eugene H. Rudnicki President and Director (1) 11/85
James G. Pouros Director (2) 12/92
Jeffrey C. Vredenbregt Vice President (3) 12/92
Lynn R. Van Horn Treasurer and Secretary(4) 5/86
(1) Mr. Rudnicki, age 62, has also been since 1980, Senior Vice
President-Acquisition of B. C. Ziegler and Company.
(2) Mr. Pouros, age 52, has also been since 1979, a member of the
law firm of O'Meara, Eckert, Pouros & Gonring.
(3) Mr. Vredenbregt, age 43, has also been, since 1993, Vice
President of B. C. Ziegler and Company, and has been Assistant
Treasurer and Controller of B. C. Ziegler and Company since May
18, 1987.
(4) Mr. Van Horn, age 43, has also been Senior Vice
President-Finance of B. C. Ziegler and Company since March 19,
1990. From March, 1985 to March 19, 1990, Mr. Van Horn was
Vice President-Finance of B. C. Ziegler and Company.
Item 11 - Executive Compensation
Since B. C. Ziegler and Company provides management and
administrative services to the Company pursuant to a management agreement
with the Company, the Company has no salaried employees. Directors,
including those who are employees of B. C. Ziegler and Company receive
annual compensation of $5,000 apiece.
Item 12 - Security Ownership of Certain Beneficial Owners and Management
The Ziegler Companies, Inc., 215 North Main Street, West Bend,
Wisconsin 53095, and Mr. James G. Pouros, 530 N. Silverbrook, #217, West
Bend, Wisconsin 53095, each own 10,000 shares of common stock of the
Company, 50% of the 20,000 outstanding shares of common stock of the
Company, and each of these owners has sole voting and dispositive powers.
B. C. Ziegler and Company, 215 North Main Street, West Bend, Wisconsin
53095, manager of the Company and the sole underwriter of the bonds offered
by the Company, is a wholly-owned subsidiary of The Ziegler Companies, Inc.
and owns 15,000 shares of preferred stock of the Company, 100% of the
15,000 outstanding shares of preferred stock of the Company. The preferred
stock is non-voting.
Item 13 - Certain Relationships and Related Transactions
B. C. Ziegler and Company, a wholly-owned subsidiary of The Ziegler
Companies, Inc. which owns 50% of the Company's outstanding stock entered
into a management agreement with the Company as of January 1, 1986. The
management agreement provides that the manager is entitled to receive a
semiannual management fee not to exceed .375% of the aggregate outstanding
principal amount of bonds issued by the Company on the last day of the
month preceding such semiannual payment date. The management fee is
payable on each semiannual payment date. As soon as possible after the end
of each fiscal year of the Company, the Company is required to advise the
manager of its preliminary calculation of its net income or loss for such
fiscal year. In the event such preliminary calculation indicates a loss,
the amount of the management fee for any such fiscal year shall be
retroactively reduced to such amount (not less than zero) as will prevent
the Company from suffering a loss (as determined by application of
generally accepted accounting principles) for such fiscal year. Any such
reduction in the management fee shall be applied to reduce any balance due,
and, to the extent it exceeds any balance due, shall be promptly refunded
to the Company. The manager earned management fees of $216,365 in 1996,
$349,925 in 1995 and $158,801 in 1994.
B. C. Ziegler and Company also acts as underwriter for the bonds
issued by the Company. In its capacity as underwriter, B. C. Ziegler and
Company receives a fee for its services equal to a percentage of the bonds
offered by the Company.
As of December 31, 1996 and 1995, the Company was indebted to B. C.
Ziegler and Company in the amount of $10,945 and $67,285, respectively, for
accrued management fees.
<PAGE>
PART IV
Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form
8-K
(a) Documents List
(1) Financial Statements
Report of Independent Public Accountants.
Balance Sheets as of December 31, 1996 and 1995.
Statements of Operations for the Years Ended December 31,
1996, 1995 and 1994.
Statements of Changes in Stockholders' Equity for the
Years Ended December 31, 1996, 1995 and 1994.
Statements of Cash Flows for the Years Ended December 31,
1996, 1995 and 1994.
Notes to Financial Statements, dated as of December 31,
1996 and 1995.
(2) Financial Statement Schedules
None
(3) Exhibits
(3) Articles of Incorporation, as amended, and Bylaws
of the Company, as amended, (incorporated by
reference to Exhibits 3(a) and 3(b) to Registration
Statement on Form S-11, Commission file number
33-21324)
(4) (A) Indenture dated January 1, 1986 between the
Company and M&I First National Bank, as
Trustee, relating to Mortgage
Certificate-Backed Bonds (incorporated by
reference to Exhibit 4(a) to Registration
Statement on Form S-11, Commission file
number 33-1726).
(B) Tenth Supplemental Indenture dated as of
October 1, 1986 (incorporated by reference to
Exhibit (4) to Form 8-K filed November 3,
1986, Commission file number 33-1726).
(C) Fifteenth Supplemental Indenture dated as of
April 1, 1987 (incorporated by reference to
Exhibit (4) to Form 8-K filed May 20, 1987,
Commission file number 33-1726).
(D) Sixteenth Supplemental Indenture dated as of
May 1, 1987 (incorporated by reference to
Exhibit (4.1) to Form 8-K filed June 12,
1987, Commission file number 33-10076).
(E) Eighteenth and Nineteenth Supplemental
Indentures dated as of June 1, 1987
(incorporated by reference to Exhibit (4.1)
and (4.2), respectively, to Form 8-K filed
July 17, 1987, Commission file number
33-10076).
(F) Twentieth, Twenty-First and Twenty-Second
Supplemental Indentures dated as of July 1,
1987 (incorporated by reference to Exhibit
(4.1), (4.2) and (4.3), respectively, to Form
8-K filed September 15, 1987, Commission file
number 33-10076).
(G) Twenty-Fourth Supplemental Indenture dated as
of October 1, 1987 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed November
18, 1987, Commission file number 33-10076).
(H) Thirty-Third Supplemental Indenture dated as
of April 1, 1988 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed May 2,
1988, Commission file number 33-10076).
(I) Thirty-Fourth Supplemental Indenture dated
June 1, 1988 and Thirty-Seventh Supplemental
Indenture dated as of July 1, 1988
(incorporated by reference to Exhibit (4.1)
and (4.4), respectively, to Form 8-K filed
August 1, 1988, Commission file number
33-21324).
(J) Thirty-Ninth Supplemental Indenture dated as
of August 1, 1988 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed October 6,
1988, Commission file number 33-21324).
(K) Fortieth Supplemental Indenture dated as of
September 1, 1988 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed October 6,
1988, Commission file number 33-21324).
(L) Forty-First Supplemental Indenture dated as
of October 1, 1988 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed November
9, 1988, Commission file number 33-21324).
(M) Forty-Second Supplemental Indenture dated as
of October 1, 1988 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed November
9, 1988, Commission file number 33-21324).
(N) Forty-Fifth Supplemental Indenture dated as
of February 1, 1989 (incorporated by
reference to Exhibit (4.1) to Form 8-K filed
April 7, 1989, Commission file number
33-21324).
(O) Forty-Seventh Supplemental Indenture dated as
of May 1, 1989 (incorporated by reference to
Exhibit (4.1) to Form 8-K filed May 30, 1989,
Commission file number 33-28290).
(P) Forty-Ninth Supplemental Indenture dated as
of July 1, 1989 (incorporated by reference to
Exhibit (4.1) to Form 8-K filed July 27,
1989, Commission file number 33-28290).
(Q) Fifty-Second Supplemental Indenture dated as
of May 1, 1990 (incorporated by reference to
Exhibit (4.1) to Form 8-K filed June 6, 1990,
Commission file number 33-28290).
(R) Fifty-Fifth Supplemental Indenture dated as
of September 1, 1990 (incorporated by
reference to Exhibit (4.1) to Form 8-K filed
September 13, 1990, Commission file number
33-28290).
(S) Sixtieth Supplemental Indenture dated as of
June 1, 1991 (incorporated by reference to
Exhibit (4.1) to Form 8-K filed July 11,
1991, Commission file number 33-28290).
(T) Sixty-First Supplemental Indenture dated as
of September 1, 1991 (incorporated by
reference to Exhibit (4.1) to Form 8-K filed
October 3, 1991, Commission file number
33-28290).
(U) Sixty-Second Supplemental Indenture dated as
of February 1, 1992 (incorporated by
reference to Exhibit (4.1) to Form 8-K filed
February 26, 1992, Commission file number
33-28290).
(V) Sixty-Third Supplemental Indenture dated as
of May 1, 1992 (incorporated by reference to
Exhibit (4.1) to Form 8-K filed June 2, 1992,
Commission file number 33-28290).
(W) Sixty-Fourth Supplemental Indenture dated as
of June 1, 1992 (incorporated by reference to
Exhibit (4.1) to Form 8-K filed June 18,
1992, Commission file number 33-28290).
(X) Sixty-Fifth Supplemental Indenture dated as
of January 1, 1993 incorporated by reference
to Exhibit (4.1) to Form 8-K filed February
1, 1993, Commission file number 33-28290).
(Y) Sixty-Sixth Supplemental Indenture dated as
of January 1, 1993 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed February
1, 1993, Commission file number 33-28290).
(Z) Sixty-Seventh Supplemental Indenture dated as
of March 1, 1993 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed March 17,
1993, Commission file number 33-28290).
(AA) Sixty-Eighth Supplemental Indenture dated as
of April 1, 1993 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed April 23,
1993, Commission file number 33-28290).
(AB) Sixty-Ninth Supplemental Indenture dated as
of May 1, 1993 (incorporated by reference to
Exhibit (4.1) to Form 8-K filed May 27, 1993,
Commission file number 33-28290).
(AC) Seventieth Supplemental Indenture dated as of
March 1, 1994 (incorporated by reference to
Exhibit (4.1) to Form 8-K filed April 4,
1994, Commission file number 33-28290).
(AD) Seventy-First Supplemental Indenture dated as
of April 1, 1994 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed May 2,
1994, Commission file number 33-28290).
(AE) Seventy-Second Supplemental Indenture dated
as of April 1, 1994 (incorporated by
reference to Exhibit (4.1) to Form 8-K filed
May 2, 1994, Commission file number
33-28290).
(AF) Seventy-Third Supplemental Indenture dated as
of April 1, 1994 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed May 6,
1994, Commission file number 33-28290).
(AG) Seventy-Fourth Supplemental Indenture dated
as of May 1, 1994 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed June 1,
1994, Commission file number 33-28290).
(AH) Seventy-Fifth Supplemental Indenture dated as
of June 1, 1994 (incorporated by reference to
Exhibit (4.1) to Form 8-K filed July 5, 1994,
Commission file number 33-28290).
(AI) Seventy-Sixth Supplemental Indenture dated as
of September 1, 1994 (incorporated by
reference to Exhibit (4.1) to Form 8-K filed
September 30, 1994, Commission file number
33-28290).
(AJ) Seventy-Seventh Supplemental Indenture dated
as of February 1, 1995 (incorporated by
reference to Exhibit (4.1) to Form 8-K filed
February 3, 1995, Commission file number
33-28290).
(AK) Seventy-Eighth Supplemental Indenture dated
as of April 1, 1995 (incorporated by
reference to Exhibit (4.1) to Form 8-K filed
May 1, 1995, Commission file number
33-28290).
(AL) Seventy-Ninth Supplemental Indenture dated as
of June 1, 1995 (incorporated by reference to
Exhibit (4.1) to Form 8-K filed June 30,
1995, Commission file number 33-28290).
(AM) Eightieth Supplemental Indenture dated as of
September 1, 1995 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed September
8, 1995, Commission file number 33-28290).
(AN) Eighty First Supplemental Indenture dated as
of April 1, 1996 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed April 26,
1996, Commission file number 33-28290).
(AO) Eighty Second Supplemental Indenture dated as
of June 1, 1996 (incorporated by reference to
Exhibit (4.1) to Form 8-K filed June 26,
1996, Commission file number 33-28290).
(All references to Supplemental Indentures relating
to Bonds which have been redeemed in whole have
been deleted.)
(10) Form of Underwriting Agreement dated as of May 17,
1995 between the Company and B. C. Ziegler and
Company (incorporated by reference to Exhibit 1 to
Registration Statement on Form S-3, Commission file
number 33-92454).
(27) Financial Data Schedule
(b) Reports on Form 8-K
None
(c) Exhibits Required by Item 601 of Regulation S-K
Included in Item (a)(3) above.
(d) Financial Statement Schedules Required by Regulation S-X
None
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, on this
21st day of February, 1997.
ZIEGLER MORTGAGE SECURITIES, INC. II
By /s/ Eugene H. Rudnicki
Eugene H. Rudnicki
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Eugene H. Rudnicki President and Director February 21, 1997
Eugene H. Rudnicki (Chief Executive Officer)
/s/ James G. Pouros Director February 21, 1997
James G. Pouros
/s/ Lynn R. Van Horn Treasurer and Secretary February 21, 1997
Lynn R. Van Horn (Principal Financial and
Accounting Officer)
<PAGE>
INDEX TO FINANCIAL STATEMENTS
The following financial statements are referenced in Item 8:
Page
Report of Independent Public Accountants 14
Balance Sheets as of December 31, 1996 and 1995 15
Statements of Operations For the Years Ended
December 31, 1996, 1995 and 1994 16
Statements of Changes in Stockholders' Equity For the
Years Ended December 31, 1996, 1995 and 1994 17
Statements of Cash Flows For the Years Ended
December 31, 1996, 1995, and 1994 18
Notes to Financial Statements, dated as of
December 31, 1996 and 1995 20
Exhibit 23 Consent of Arthur Andersen LLP 28
Exhibit 27 Financial Data Schedule 29
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
Ziegler Mortgage Securities, Inc. II:
We have audited the accompanying balance sheets of ZIEGLER MORTGAGE
SECURITIES, INC. II (a Wisconsin corporation) as of December 31, 1996 and
1995, and the related statements of operations, changes in stockholders'
equity and cash flows for each of the three years in the period ended
December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Ziegler
Mortgage Securities, Inc. II as of December 31, 1996 and 1995, and the
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
February 7, 1997.
<PAGE>
ZIEGLER MORTGAGE SECURITIES, INC. II
BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
ASSETS
Cash $ 74,291 $ 83,353
Money market investments, at cost,
which approximates market 456,228 341,861
Total cash and cash equivalents 530,519 425,214
Cash and investments held by trustee, at cost,
which approximates market 3,347,344 4,207,178
Accrued interest receivable 707,253 855,783
Mortgage Certificates, held by trustee (net of
purchase discount of $2,795,809 and $3,425,237,
respectively) 98,182,510 116,345,952
Deferred issuance costs 2,758,864 3,378,116
Total assets $105,526,490 $125,212,243
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued interest payable $ 2,948,545 $ 3,716,958
Mortgage Certificate-Backed Bonds payable 101,047,000 119,908,000
Payable to B. C. Ziegler and Company 10,945 67,285
Total liabilities 104,006,490 123,692,243
Stockholders' Equity:
Preferred Stock, $.10 par value, non-voting,
$9.00 non-cumulative dividend,
$100 redemption price;
200,000 shares authorized,
15,000 shares issued and
outstanding, respectively 1,500,000 1,500,000
Common stock, $1 par value,
56,000 shares authorized,
20,000 shares issued and outstanding 20,000 20,000
Retained earnings - -
Total stockholders' equity 1,520,000 1,520,000
Total liabilities and stockholders' equity $105,526,490 $125,212,243
</TABLE>
The accompanying notes to financial statements are an integral
part of these balance sheets.
<PAGE>
ZIEGLER MORTGAGE SECURITIES, INC. II
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Revenues:
Interest income $ 9,635,812 $ 10,395,747 $ 10,129,823
Gain on sale of mortgage
certificates 747,579 228,031 1,014,811
Total revenues 10,383,391 10,623,778 11,144,634
Expenses:
Interest expense 9,158,478 9,764,637 9,654,473
Amortization of deferred
issuance costs 805,971 359,513 1,111,631
Management fee 216,365 349,925 158,801
General and administrative 202,577 149,703 219,729
Total expenses 10,383,391 10,623,778 11,144,634
Income before income taxes - - -
Provision for income taxes - - -
Net income $ - $ - $ -
</TABLE>
The accompanying notes to financial statements are an integral
part of these statements.
<PAGE>
ZIEGLER MORTGAGE SECURITIES, INC. II
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Common Stock Preferred Stock Total
Number Number Stock-
of of Retained holders'
Shares Amount Shares Amount Earnings Equity
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1993 20,000 $20,000 20,000 $2,000,000 $ - $2,020,000
Redemption of
preferred stock - - (5,000) (500,000) - (500,000)
Net income - - - - - -
Balance at
December 31, 1994 20,000 20,000 15,000 1,500,000 - 1,520,000
Net income - - - - - -
Balance at
December 31, 1995 20,000 20,000 15,000 1,500,000 - 1,520,000
Net income - - - - - -
Balance at
December 31, 1996 20,000 $20,000 15,000 $1,500,000 $ - $1,520,000
</TABLE>
The accompanying notes to financial statemetns are an integral
part of these statements.
<PAGE>
ZIEGLER MORTGAGE SECURITIES, INC. II
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ - $ - $ -
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Gain on sale of Mortgage
Certificates (747,579) (228,031) (1,014,811)
Discount accretion on
Mortgage Certificates (113,051) (123,337) (116,878)
Amortization of deferred
issuance costs 805,971 359,513 1,111,631
Change in assets and liabilities:
Decrease (Increase) in -
Funds held by trustee 859,834 (64,595) 20,874,119
Accrued interest receivable 148,530 (11,708) 119,467
Increase (Decrease) in -
Payable to
B. C. Ziegler and Company (56,340) (172,912) (26,943)
Accrued interest payable (768,413) 103,030 (1,430,566)
Net cash provided by (used in)
operating activities 128,952 (138,040) 19,516,019
CASH FLOWS FROM INVESTING
ACTIVITIES:
Cash acquired through merger - - 55,249
Sale and redemption of
Mortgage Certificates 25,062,114 8,011,228 33,126,215
Purchase of Mortgage Certificates (6,038,041) (10,604,175) (20,681,090)
Net cash provided by (used in)
investing activities 19,024,073 (2,592,947) 12,500,374
CASH FLOWS FROM FINANCING
ACTIVITIES:
Issuance of Mortgage
Certificate-Backed Bonds 6,037,280 10,597,250 20,749,705
Principal payments on
Mortgage Certificate-Backed Bonds (25,085,000) (8,035,000) (52,154,000)
Redemption of preferred stock - - (500,000)
Net cash provided by (used in)
financing activities (19,047,720) 2,562,250 (31,904,295)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 105,305 (168,737) 112,098
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 425,214 593,951 481,853
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 530,519 $ 425,214 $ 593,951
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Interest paid during the year $ 9,926,891 $ 9,661,607 $11,085,000
Income taxes paid during the year $ - $ - $ -
SUPPLEMENTAL SCHEDULE OF
NONCASH INVESTING ACTIVITIES:
Assets acquired through merger,
primarily Mortgage Certificates $ - $ - $ 2,096,000
Liabilities assumed through merger,
primarily Mortgage Certificate-
Backed Bonds $ - $ - $ 2,151,000
</TABLE>
The accompanying notes to financial statements are an integral
part of these statements.
<PAGE>
ZIEGLER MORTGAGE SECURITIES, INC. II
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(1) Organization -
Ziegler Mortgage Securities, Inc. II (the "Company") is a limited
purpose finance company. The Company was organized to facilitate the
financing of mortgage loans. The common stock of the Company is
owned equally by The Ziegler Companies, Inc. and James G. Pouros.
(2) Summary of Significant Accounting Policies -
Mortgage Certificates are carried at par value less unamortized
purchase discount. The purchase discount on the Mortgage
Certificates is amortized over the life of the related outstanding
Mortgage Certificate- Backed Bonds (the "Bonds") using the bonds
outstanding method which approximates the effective interest rate
method. The market values of the Mortgage Certificates at December
31, 1996 and 1995 were approximately $103,022,000 and $124,478,000,
respectively.
Deferred bond issuance costs consist of underwriting discounts and
other expenses of issuance and distribution. Such costs are
amortized over the life of the outstanding Bonds using the bonds
outstanding method which approximates the effective interest rate
method.
Cash equivalents are defined as unrestricted short-term investments
maturing within three months of the date of purchase.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the dates of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results
could differ from those estimates.
(3) Mortgage Certificates -
The Mortgage Certificates consist of GNMA Certificates (comprising
89% of the portfolio as of December 31, 1996) guaranteed by the
Government National Mortgage Association ("GNMA") and/or Guaranteed
Mortgage Pass-Through Certificates (comprising 11% of the portfolio)
issued by the Federal National Mortgage Association ("FNMA")
(collectively the "Mortgage Certificates"). The full and timely
payment of the principal and interest on the GNMA Certificates is
guaranteed by GNMA. The GNMA guaranty is backed by the full faith
and credit of the United States government. FNMA guarantees the
payment of principal and interest on the FNMA Certificates but the
FNMA guaranty is not backed by the full faith and credit of the
United States government.
Principal and interest payments received from the Mortgage
Certificates are controlled by the trustee. These funds are utilized
to meet the semiannual interest payments on the Bonds, to reduce the
outstanding principal balance of the Bonds and to pay certain
operating expenses of the Company.
(4) Mortgage Certificate-Backed Bonds Payable -
Bonds outstanding at December 31, 1996, consist of the following:
<TABLE>
<CAPTION>
Outstanding
Principal
Original Amounts
Date of Stated Principal at
Series Rate Bonds Maturity Amounts 12/31/96
<C> <C> <C> <C> <C> <C>
10 8.90% 10/1/86 10/1/21 $ 8,200,000 $ 2,324,000
16 9.00% 5/1/87 1/1/22 4,500,000 2,261,000
19 9.15% 6/1/87 5/1/22 5,750,000 3,771,000
20 9.00% 7/1/87 6/1/22 5,418,000 3,470,000
21 9.00% 7/1/87 6/1/22 5,266,000 4,833,000
24 9.20% 10/1/87 2/1/22 5,237,000 4,243,000
33 9.10% 4/1/88 10/15/21 7,054,000 3,619,000
34 9.35% 6/1/88 5/15/23 4,163,000 3,304,000
39 9.40% 8/1/88 8/15/23 5,780,000 3,774,000
40 9.50% 9/1/88 9/15/23 6,800,000 1,605,000
41 9.30% 10/1/88 10/15/23 4,655,000 4,108,000
42 9.20% 10/1/88 10/15/23 4,000,000 3,530,000
47 9.75% 5/1/89 2/15/24 3,744,000 1,690,000
49 8.45% 7/1/89 7/15/22 2,740,000 2,584,000
52 9.35% 5/1/90 5/15/20 3,000,000 401,000
55 9.00% 9/1/90 10/01/20 3,244,000 507,000
61 8.00% 9/1/91 11/15/19 3,390,000 1,337,000
62 7.25% 2/1/92 4/15/22 2,925,000 1,347,000
63 7.60% 5/1/92 5/15/22 3,400,000 1,244,000
64 7.40% 6/1/92 6/15/22 3,300,000 1,394,000
65 7.00% 1/1/93 1/15/28 3,029,000 2,957,000
66 7.00% 1/1/93 1/15/28 3,000,000 2,925,000
68 6.25% 4/1/93 5/01/23 3,000,000 2,440,000
69 6.00% 5/1/93 5/01/23 3,022,000 2,457,000
70 6.00% 3/1/94 11/15/28 3,390,000 3,325,000
71 7.00% 4/1/94 9/20/23 3,015,000 2,476,000
72 7.00% 4/1/94 10/15/23 2,897,000 2,827,000
73 7.00% 4/1/94 4/15/24 3,130,000 2,985,000
74 7.10% 5/1/94 2/15/24 3,145,000 3,072,000
75 7.10% 6/1/94 2/15/24 3,290,000 3,203,000
76 7.35% 9/1/94 9/15/29 2,535,000 2,498,000
77 8.00% 2/1/95 10/15/29 3,066,000 3,031,000
78 7.50% 4/1/95 9/15/29 2,597,000 2,573,000
79 6.75% 6/1/95 6/15/22 2,622,000 2,579,000
80 7.00% 9/1/95 7/15/23 2,640,000 2,607,000
81 7.00% 4/1/96 5/15/28 3,237,000 3,237,000
82 7.25% 6/1/96 9/15/30 2,987,000 2,984,000
143,168,000 99,522,000
American Mortgage Securities, Inc.
Mortgage Certificate-Backed Bonds
5 7.35% 3/1/92 3/01/22 3,000,000 1,525,000
$146,168,000 $101,047,000
</TABLE>
The stated maturities are the dates on which Bonds will be fully paid
assuming no prepayments are received on the Mortgage Certificates
which serve as collateral for the Bonds and no Bonds are called. The
stated maturities of the Bonds will be shortened by prepayments on
the Mortgage Certificates and by any Bond calls.
The Bonds can be redeemed each month without premium under the
following circumstances:
The Company must call the Bonds, to the extent funds are
available, commencing in the twelfth month following the
original issuance of each series or commencing at such time as
the aggregate balance in the redemption fund, as defined in the
prospectus, for each series that reaches $100,000; whichever
occurs first.
The Bonds of any series may be redeemed in whole by the Company
after the third anniversary of the original issuance and,
commencing with Series 16 bonds, at any time as the outstanding
principal amount of such series is less than 10% of the
aggregate principal amount of such series originally issued.
Bondholders can present their Bonds for redemption each month
commencing with the second calendar month following the month
in which each series is originally issued. The Company will
redeem such Bonds to the extent funds are available.
The market values in the secondary bond market of the Bonds
outstanding as of December 31, 1996 and 1995, approximated
$101,173,000 and $120,264,000, respectively.
(5) Related Parties -
B. C. Ziegler and Company, a wholly-owned subsidiary of The Ziegler
Companies, Inc. which owns 50% of the Company's outstanding stock, is
the sole underwriter for the Bonds issued by the Company. In its
capacity as underwriter, B. C. Ziegler and Company received a fee for
its services equal to a percent of the Bonds offered by the Company.
B. C. Ziegler and Company provided management and administrative
services to the Company for which, pursuant to a management agreement
with the Company, they were entitled to receive a management fee not
to exceed .375% of the aggregate outstanding principal amount of
bonds issued by the Company at the last day of the month preceding
each semiannual payment date. Any calculated management fee is
retroactively reduced to such amount (not less than zero) as will
prevent the Company from suffering a loss for each fiscal year.
As of December 31, 1996 and 1995, the Company owed B. C. Ziegler and
Company $10,945 and $67,285, respectively, for accrued management
fees.
During 1994, the Company redeemed 5,000 shares of the preferred stock
from B. C. Ziegler and Company, the sole owner of the Company's
preferred stock, for $500,000.
(6) Merger -
Effective December 30, 1994, the Company merged with American
Mortgage Securities, Inc. ("AMSI"), another limited purpose finance
company organized to facilitate the financing of mortgage loans.
Prior to the merger, AMSI was owned 50% by The Ziegler Companies,
Inc. and 50% by Mr. James G. Pouros. The Company was the surviving
corporation and assumed all the assets and liabilities of AMSI at
year end 1994.
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit Page
3 Articles of Incorporation, as amended, and
Bylaws of the Company, as amended, (incor-
porated by reference to Exhibits 3(a) and 3(b)
to Registration Statement on Form S-11,
Commission file number 33-21324) *
4 (A) Indenture dated January 1, 1986 between the
Company and M&I First National Bank, as
Trustee, relating to Mortgage Certificate-
Backed Bonds (incorporated by reference to
Exhibit 4(a) to Registration Statement on
Form S-11, Commission file number 33-1726) *
4 (B) Tenth Supplemental Indenture dated as of
October 1, 1986 (incorporated by reference
to Exhibit (4) to Form 8-K filed November 3,
1986, Commission file number 33-1726) *
4 (C) Fifteenth Supplemental Indenture dated as of
April 1, 1987 (incorporated by reference
to Exhibit (4) to Form 8-K filed May 20, 1987,
Commission file number 33-1726) *
4 (D) Sixteenth Supplemental Indenture dated as of
May 1, 1987 (incorporated by reference to
Exhibit (4.1) to Form 8-K filed June 12, 1987,
Commission file number 33-10076) *
4 (E) Eighteenth and Nineteenth Supplemental
Indentures dated as of June 1, 1987
incorporated rated by reference to Exhibit
(4.1) and (4.2), respectively, to Form 8-K
filed June 12, 1987, Commission file number
33-10076) *
4 (F) Twentieth, Twenty-First and Twenty-Second
Supplemental Indentures dated as of July 1,
1987 (incorporated by reference to Exhibit
(4.1), (4.2) and (4.3), respectively, to
Form 8-K filed September 15, 1987,
Commission file number 33-10076) *
4 (G) Twenty-Fourth Supplemental Indenture dated
as of October 1, 1987 (incorporated by
reference to Exhibit (4.1) to Form 8-K filed
November 18, 1987, Commission file number
33-10076) *
4 (H) Thirty-Third Supplemental Indenture dated
as of April 1, 1988 (incorporated by
reference to Exhibit (4.1) to Form 8-K filed
May 2, 1988, Commission file number 33-10076) *
4 (I) Thirty-Fourth Supplemental Indenture dated
June 1, 1988 and Thirty-Seventh Supplemental
Indenture dated as of July 1, 1988 (incor-
porated by reference to Exhibit (4.1) and
(4.4), respectively, to Form 8-K filed
August 1, 1988, Commission file number
33-21324) *
4 (J) Thirty-Ninth Supplemental Indenture dated
August 1, 1988 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed October 6,
1988, Commission file number 33-21324) *
4 (K) Fortieth Supplemental Indenture dated as of
September 1, 1988 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed October 6,
1988, Commission file number 33-21324) *
4 (L) Forty-First Supplemental Indenture dated as
of October 1, 1988 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed November 9,
1988, Commission file number 33-21324) *
4 (M) Forty-Second Supplemental Indenture dated as
of October 1, 1988 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed
November 9, 1988, Commission file number
33-21324) *
4 (N) Forty-Fifth Supplemental Indenture dated as
of February 1, 1989 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed April 7,
1989, Commission file number 33-21324) *
4 (O) Forty-Seventh Supplemental Indenture dated as
of May 1, 1989 (incorporated by reference to
Exhibit (4.1) to Form 8-K filed May 30, 1989,
Commission file number 33-28290) *
4 (P) Forty-Ninth Supplemental Indenture dated as
of July 1, 1989 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed July 27,
1989, Commission file number 33-28290) *
4 (Q) Fifty-Second Supplemental Indenture dated as
of May 1, 1990 (incorporated by reference to
Exhibit (4.1) to Form 8-K filed June 6, 1990,
Commission file number 33-28290) *
4 (R) Fifty-Fifth Supplemental Indenture dated as
of September 1, 1990 (incorporated
by reference to Exhibit (4.1) to Form 8-K
filed September 13 1990, Commission file
number 33-28290) *
4 (S) Sixtieth Supplemental Indenture dated as
of June 1, 1991 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed July 11,
1991, Commission file number 33-28290) *
4 (T) Sixty-First Supplemental Indenture dated as
of September 1, 1991 (incorporated by
reference to Exhibit (4.1) to Form 8-K
filed November 20, 1991, Commission file
number 33-28290) *
4 (U) Sixty-Second Supplemental Indenture dated as
of February 1, 1992 (incorporated by
reference to Exhibit (4.1) to Form 8-K
filed February 26, 1992, Commission file
number 33-28290) *
4 (V) Sixty-Third Supplemental Indenture dated as
of May 1, 1992 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed June 2,
1992, Commission file number 33-28290) *
4 (W) Sixty-Fourth Supplemental Indenture dated as
of June 1, 1992 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed June 18,
1992, Commission file number 33-28290) *
4 (X) Sixty-Fifth Supplemental Indenture dated as
of January 1, 1993 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed February 1,
1993, Commission file number 33-28290) *
4 (Y) Sixty-Sixth Supplemental Indenture dated as
of January 1, 1993 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed February 1,
1993, Commission file number 33-28290) *
4 (Z) Sixty-Seventh Supplemental Indenture dated as
of March 1, 1993 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed March 17,
1993, Commission file number 33-28290) *
4(AA) Sixty-Eighth Supplemental Indenture dated as
of April 1, 1993 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed April 23,
1993, Commission file number 33-28290) *
4(AB) Sixty-Ninth Supplemental Indenture dated as
of May 1, 1993 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed May 27,
1993, Commission file number 33-28290) *
4(AC) Seventieth Supplemental Indenture dated as
of March 1, 1994 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed April 4,
1994, Commission file number 33-28290) *
4(AD) Seventy-First Supplemental Indenture dated as
of April 1, 1994 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed May 2,
1994, Commission file number 33-28290) *
4(AE) Seventy-Second Supplemental Indenture dated as
of April 1, 1994 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed May 2,
1994, Commission file number 33-28290) *
4(AF) Seventy-Third Supplemental Indenture dated as
of April 1, 1994 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed May 6,
1994, Commission file number 33-28290) *
4(AG) Seventy-Fourth Supplemental Indenture dated as
of May 1, 1994 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed June 1,
1994, Commission file number 33-28290) *
4(AH) Seventy-Fifth Supplemental Indenture dated as
of June 1, 1994 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed July 5,
1994, Commission file number 33-28290) *
4(AI) Seventy-Sixth Supplemental Indenture dated as
of September 1, 1994 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed September 30,
1994, Commission file number 33-28290) *
4(AJ) Seventy-Seventh Supplemental Indenture dated as
of February 1, 1995 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed February 3,
1995, Commission file number 33-28290) *
4(AK) Seventy-Eighth Supplemental Indenture dated as
of April 1, 1995 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed May 1,
1995, Commission file number 33-28290) *
4(AL) Seventy-Ninth Supplemental Indenture dated as
of June 1, 1995 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed June 30,
1995, Commission file number 33-28290) *
4(AM) Eightieth Supplemental Indenture dated as
of September 1, 1995 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed September 8,
1995, Commission file number 33-28290) *
4(AN) Eighty-First Supplemental Indenture dated as
of April 1, 1996 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed April 21,
1996, Commission file number 33-28290) *
4(AO) Eighty-Second Supplemental Indenture dated as
of June 1, 1996 (incorporated by reference
to Exhibit (4.1) to Form 8-K filed June 26,
1996, Commission file number 33-28290) *
10 Underwriting Agreement dated as of May 17,
1995 between the Company and B. C. Ziegler
and Company (incorporation by reference to
Exhibit 1 to Registration Statement on Form
S-3, Commission file number 33-92454) *
23 Consent of Arthur Andersen LLP
27 Financial Data Schedule
*Incorporated by reference
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report included in this Form 10-K into the Company's
previously filed Registration Statement File No. 33-92454 on Form S-3.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
March 27, 1997.
<PAGE>
EXHIBIT 27
FINANCIAL DATA SCHEDULE
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Ziegler Mortgage Securities, Inc. II financial statements and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 530,519
<SECURITIES> 98,182,510<F3>
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 105,526,490
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 101,047,000
0
1,500,000
<COMMON> 20,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,520,000
<SALES> 0
<TOTAL-REVENUES> 10,383,391<F2>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,224,913
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,158,478
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F3>GNMA mortgage certificates net of purchase discounts and held by a
trustee.
<F1>Registrant has an unclassified balance sheet.
<F2>Revenues consist primarily of interest income.
</FN>
</TABLE>
